Housing Benefit reforms are based on mistaken beliefs

Research into rents in London shows that an underlying assumption behind the government’s Housing Benefit reforms is mistaken. As we’ve noted over the past year, the availability of HB will be restricted and the amount of help tenants get will be reduced by the government’s proposals for Housing Benefit and cuts in support for local authorities. These include:

It has been obvious for some time that people in London, where rents are highest, will be hardest hit, with London Councils warning that that 82,000households could be made homeless in the capital; by 2020, every tenant’s HB will be less than enough to cover their rent.

The government’s argument in response has been that we’re over-estimating the disruption, because these reforms will force rents down. Rents have gone up because landlords know the government will pay tenants’ rents and most HB claimants should be able to negotiate lower rents when their benefits come down.

This has always been a weak argument – the British Property Federation (among others) have pointed out that it rests, at least in part, on distorted figures and last year a survey by London Councils found that about 60% of 270 landlords who responding to a survey said they would not lower their rents at all in response to the changes in Local Housing Allowance.

The London Residential Review, published by property network Frank Knight, reports on a property market that is once again pulling away from the rest of the country. Rents “have jumped by 25% since their low point in June 2009” and “increasing competition between tenants has, in turn, boosted rents”. Landlords are renegotiating rents upwards, not because of HB, but “while supply remains so constrained” and the organisation “expect[s] rents to continue to rise due to the supply shortage.”

Of course, Frank Knight are best known for dealing in ‘prime’ properties, but Residential Lettings London report a similar picture for average rents, which have risen 6.6% in the past year for both flats and houses. yesterday, HomeLet, a “tenant referencing specialist” reported that the increase was, in fact, 12.2%.

Now, I suppose one lesson we should draw from the fact that these figures are so different is that we should be careful about using surveys like this, which are often extended press releases for the businesses behind them. Nonetheless, they do all indicate that there is currently a landlords’ market: the notion that claimants will be able to force rents down because their HB has been cut looks more dubious than ever.

If the government was planning to increase the supply of rented accommodation at the same time as cutting help for tenants, then they might have some chance of success. But their gestures in that direction are feeble in the extreme (surprise, surprise, this is one of Nick Clegg’s jobs) – the reforms will put most pressure on the poor and weak, hardly any on landlords.

Written by Richard Exell

I am the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues, including the debates about the European social model and labour market flexibility. I also represent the TUC on the Industrial Injuries Advisor…

Although I would never vote Tory in a million years, it is only they who have the guts to tackle this country’s terrible welfare dependency culture. Wholesale reform of all welfare is the only way to ensure that a life on benefits is not an option, as is currently the case for many individuals. All claimants should receive benefits lower than a full-time job paying minimum wage, no matter where they live and no matter what their family size. This is the only way to ensure that they have the incentive to get out and look for work and to support their dependents.

Welfare dependency was created under Margaret Thatcher. The 1979/83 Conservative government abolished the obligation to register for work at a JobCentre in order to claim Unemployment Benefit from an Unemployment Benefit Office, introduced 2 weekly signing and allowed sickness claimants to spend a lifetime drawing Incapacity Benefit, which the Conservative Party introduced when Peter Lilley was Secretary of State and John Major Prime Minister.

More to the point, Conservative Housing Minister William Waldegrave deregulated rents claiming Housing Benefit could foot the bill. Had the money gone, not into rents, but bricks & mortar, as it had before Margaret Thatcher took office, Great Britain would not have the housing shortage she does now.